IT’S OFFICIAL: Banks In Europe May Now Seize Deposits To Cover Their Gambling Losses; CITI: Cyprus Set A Bad Precedent, And Is Long-Term Negative For The Euro

IT’S OFFICIAL: Banks In Europe May Now Seize Deposits To Cover Their Gambling Losses

Henry Blodget | Mar. 25, 2013, 4:38 AM | 1,761 | 12

As expected, Cyprus and the EU reached a new late-night bailout deal last night that will reduce the chance that Cyprus’s financial system and economy will completely implode. The new deal is better than the last deal in one key respect: Deposits under 100,000 euros will be protected. That’s very important. Those deposits were ostensibly “insured.” To seize them, the way the last bailout deal would have, would have been grossly unfair and would have set a truly alarming precedent. Now, small depositors in European banks can breathe more easily. At least in this case of gross malpractice on the part of reckless bank managers, their life savings have been preserved. Alas, the good news ends there.

Although deposits under 100,000 euros will be spared, deposits over 100,000 euros will be seized and subjected to an as-yet undetermined haircut–with the confiscated money going to bail out the gambling losses of the aforementioned reckless idiots who run some of Cyprus’s banks. This seizure, needless to say, will dampen the enthusiasm of rich depositors for keeping money in banks that get themselves into financial trouble. And because many, many banks in Europe have gotten themselves into financial trouble, this will create a general state of unease among rich depositors throughout the Eurozone. And it should wig out some bank lenders, as well. After all, never before in the history of this global financial crisis has a major banking system allowed depositors to lose money, no matter how reckless and stupid and greedy their bank managers have been. And only rarely have bank lenders–those who hold bank bonds–been asked to pony up. In this case, however, the depositors will lose money. Perhaps a lot of money. And if there had been big bank debtholders in Cyprus, they probably would have been socked with losses, too.

It’s possible that everyone will just laugh off Cyprus, viewing it as an exceptional one-off. After all, the Cyprus banking system was notorious for being the offshore money-laundering arm of many Russian oligarchs, so many folks will likely view this asset seizure as a case of “just desserts.”  But this optimistic view of the Cyprus horrorshow overlooks one key fact: The main reason that Cyprus depositors will lose their cash is because it has become politically difficult (impossible?) for leaders in Germany and other rich European countries to bail out their brethren in the “periphery” without taking many pounds of flesh. And it is that precedent, in addition to the fate of big depositors in Cyprus, that should spook Europe’s big bank depositors and lenders. If Germany is done bailing out countries and banks without having those countries and banks cover some of the cost, it’s not clear why Germany will relent next time Spain, Italy, Greece, and other countries in near-desperately bad financial shape come rushing to the EU with their hands out. Read more of this post

One lump or two? Indonesian “sugar samurai” serve foreigners sparingly

Published: Monday March 25, 2013 MYT 11:19:00 AM

One lump or two? Indonesian “sugar samurai” serve foreigners sparingly

JAKARTA: White sugar prices hit a record in Indonesia last summer and further spikes are expected this year even though the world is awash with the sweetener. The main cause, say critics, is a small group of traders known in the industry as sugar samurai.

There is no evidence the samurai are doing anything illegal but they buy most of the crop through an auction system that works in their favor, say the critics, who include industry officials, government advisers and other traders. Some of the purported samurai firms deny the auctions are unfair.

The system, which some samurai helped establish, gives them the right to buy sugar at the expense of other traders under certain conditions. The samurai also run most distribution and retail networks, giving them almost total control over the market and the retail price of sugar, the critics add.

That has made it virtually impossible for foreign commodity firms or other local players to enter one of Southeast Asia’s largest white sugar markets, said Indonesia’s commission for the supervision of business competition, an independent body that looks into unfair and monopolistic business practices. Read more of this post

Mango Mirroring Zara Challenges Europe’s Wealthiest Man; Mango’s revenue hit 1.41 billion euros in 2011; Isak Andic is the founder, chairman, and owner of almost 100 percent of Mango

Mango Mirroring Zara Challenges Europe’s Wealthiest Man

Two years ago, Spanish retailer Mango could barely convince its employees to wear its dresses, skirts, and blouses, which many workers — and customers — thought were too formal.

Today, Mango has ditched the glitz in favor of more casual attire like that from Spanish rival Inditex SA (ITX), the world’s biggest seller of apparel and owner of the Zara brand. The change has helped Mango outpace Inditex in Spain’s 16.2 billion- euro ($21 billion) clothing market.

“We had gone way too far with our focus on clothes for parties and events,” said Enric Casi, general manager of the Barcelona-based retailer. “Not even our employees wore Mango.”

The casual push wasn’t the only lesson Mango took from Arteixo, Spain-based Inditex as it sought to address a decline in profit of almost 60 percent in the two years through 2011. That year, Isak Andic, the founder, chairman, and owner of almost 100 percent of the company, stepped back into a stronger day-to-day management role to help reformulate strategy.

Since then, Mango says, the chain has cut prices by about 20 percent across the board, bringing them closer to Zara’s. And the company has stepped up expansion outside of crisis-weary Spain and placed more emphasis on the fast-fashion model that has helped Inditex prosper. Read more of this post

China’s swap market is signaling interest-rate increases for the first time since 2011 after inflation accelerated to a 10-month high and the housing market defied government cooling efforts.

Zhou on High Alert Prompts Swaps PBOC Rise Signal

China’s swap market is signaling interest-rate increases for the first time since 2011 after inflation accelerated to a 10-month high and the housing market defied government cooling efforts.

Two-year contracts that exchange the People’s Bank of China’s 3 percent savings benchmark for a fixed payment rose eight basis points this month to 3.03 percent, data compiled by Bloomberg show. The swap had been lower than the one-year PBOC deposit rate for 16 months. Of the 27 economists surveyed this month by Bloomberg, 13 predicted higher rates in 2013, with Credit Agricole CIB, Daiwa Capital Markets and Nomura Holdings Inc. forecasting two increases.

PBOC Governor Zhou Xiaochuan said on March 13 the government should be on “high alert” after consumer prices jumped a more-than-forecast 3.2 percent in February. Data last week showed new home prices last month posted the broadest advance since December 2011. China’s 10-year bond yield is 38 basis points higher than inflation, compared with a similar U.S. real yield of minus 8 basis points.

“The rising inflation trend and upward pressure on home prices will continue, forcing the central bank to tighten,” said Dariusz Kowalczyk, senior economist and strategist with Credit Agricole in Hong Kong. “Main lending rates will be hiked to reduce inflation expectations.”

Inflation will probably quicken to 4 percent in the second half, a level that will “really concern” the central bank, said Kowalczyk, who accurately predicted the February consumer- price gain. He forecasts two deposit rate increases after June to 3.5 percent to protect returns on savings. Read more of this post

Free Tires for Malaysian Cabs Expose Budget Risk Before Vote; “It’s not in a proper way, it’s like rasuah,” Ramachandran said, using the Malay word for bribery. “I want to change the government and see what happens for the next five years.”

Free Tires for Malaysian Cabs Expose Budget Risk as Vote Looms

Malaysians like cab driver Ramakrishnan Ramachandran are getting used to handouts from the government as the next election looms. The budget deficit is set to show the strain regardless of who wins the vote.

From rebates for smartphones to household subsidies for electricity and higher wages for civil servants, Prime Minister Najib Razak has gone on a spending binge to woo voters ahead of polls that must be held by late June. In 2012, he announced a 35 million ringgit ($11 million) voucher program to help taxi drivers pay for new tires.

“The government simply throws the money,” Ramachandran, 54, said as he waited for passengers outside a Kuala Lumpur shopping mall, adding that the 520 ringgit he received for the wheels won’t deter him from voting for the opposition for the first time. “Whatever the government gives, I take.”

The opposition, attempting to break the ruling coalition’s hold of more than five decades on power, is also prepared to be generous as it promises free university education, lower fuel prices and the elimination of toll fees. Any fiscal deterioration from persistent largesse could raise the risk of capital outflows should the U.S. shift to tightening monetary policy, triggering a reversal in the flood of cash into emerging markets in recent years.

“No one will be overly alarmed by whether Malaysia can pay for its spending now but its fiscal trajectory is not a pretty thing,” said Vishnu Varathan, a Singapore-based Mizuho Corporate Bank Ltd. economist who has covered Malaysia for seven years. “Should investors start pulling money out of emerging markets, Malaysia is not at the top of the hit list but the sustainability of the fiscal situation is a concern for longer- term investors.” Read more of this post

Norway Becomes Petro-State as Investors Balk at Hidden AAA Risks

Norway Becomes Petro-State as Investors Balk at Hidden AAA Risks

Norway, home to the world’s biggest sovereign wealth fund, is betting it can afford to ignore investor outrage.

After shocking global credit markets in 2011 by pulling support from the once AAA and now junk-rated lender Eksportfinans ASA, the government unveiled plans in January to cut tariffs on gas transport by 90 percent, sapping income for those funding the venture by as much as $7 billion.

Investors are now asking themselves how much risk they’re willing to accept to gain access to western Europe’s biggest oil and gas reserves. And while Norway boasts a stable AAA rating and the world’s smallest default risk, the government’s decision to ride roughshod over investors is starting to resemble actions seen in less stable democracies such as Venezuela and Russia.

The planned tariff cut “undermines Norway’s reputation as a stable and predictable country for investments,” Solveig Gas Norway AS and Silex Gas Norway AS, two of the companies backing the pipeline network that charges the tariffs, Gassled, said in a March 15 letter. It “represents an unauthorized intervention in the infrastructure owners’ legally protected rights and expectations,” they said. Read more of this post

Hong Kong’s Real-Estate Brokers Feel the Chill; Hong Kong is home to more than 6,000 real estate offices, whose numbers eclipse even that of the city’s 7-Elevens and McDonald’s

March 25, 2013, 6:24 AM

Hong Kong’s Real-Estate Brokers Feel the Chill

The armies of young real-estate agents that flood Hong Kong’s shopping malls on weekends could see their ranks thinning out in the coming months, the chief analyst at Hong Kong’s largest listed real-estate broker says.

Thanks to the government’s latest round of cooling measures, transactions across the city have dropped dramatically, Midland Realty’s Buggle Lau said Thursday. Since late February, when the government doubled the stamp duty on most property purchases, transactions on the secondary market at the city’s 10 most popular housing estates have plummeted to as few as four or five on recent weekends, Mr. Lau said. By contrast, a year ago, there were closer to 100 transactions per weekend, he said.

As property prices have ballooned by 120% in recent years, Hong Kong’s real-estate offices have become even more common a sight than the city’s 7-Elevens and McDonalds, as thousands of salesmen have jumped in on the bonanza. There are more than 6,000 such offices in Hong Kong, with 300 of them opening their doors in just the past year. Read more of this post

Prices of Chinese medicine in Yunnan province have increased over 10-fold after four years of persistent drought

High heat and speculation set Chinese medicine prices ablaze

Staff Reporter  2013-03-24

Prices of Chinese medicine in Yunnan province have increased over 10-fold after four years of persistent drought, which has severely limited the scale of Chinese herb and tea production. Increasing demand for the disappearing herbs has only added upward pressure.

Low rainfall, high temperatures and strong wind in the spring have affected the production output of multiple tea-producing cities, especially Pu’er and Dali. Prices of green tea, pu’er tea and dianhong black tea have surged by 10%, 20% and 30% respectively since last spring, according to Chinese-language Henan Economic News.

The droughts have also driven up the prices of Chinese medicines such as dong quai, pseudo ginseng and other plants that belong to the genus panax. Dong quai fetched a market price of 34 yuan (US$5.4) a kg in Aug. 2012 but now goes for 90 yuan (US$14). The pseudo ginseng also doubled from 300-400 yuan (US$48-64) a kg in 2012 to 700-800 yuan (US$112-128) this year. Other panax plants have increased by 40% to around 400 yuan (US$64) a kg.

Chinese medicine businesses said speculators in recent years have caused herb prices to fluctuate and are using some medicines as their investments tools. Some Chinese medicines practitioners said the value of a prescription has gone up from a dozen yuan a few years ago to up to 400-500 yuan (US$64-80) now. Read more of this post

Former PetroChina chairman detained for corruption: Boxun

Former PetroChina chairman detained for corruption: Boxun

Staff Reporter 2013-03-24

Jiang Jiemin, the former chairman of PetroChina, China’s biggest oil producer, has been detained by central discipline authorities for corruption, reports Boxun, a citizen journalism website that often makes claims that are difficult to prove.

According to Boxun, a “reliable source” inside the Commission for Discipline Inspection claims that Jiang, who was also the former general manager of PetroChina’s state-owned parent China National Petroleum Corporation and a former vice governor of Qinghai province, was placed under “double regulation” shortly after stepping down as PetroChina chairman last week.

Under the Communist Party’s investigation ordinance, double regulation is one of several strategies disciplinary authorities may employ when conducting an investigation into a government official, and requires that the subject appear at a specified time and location to answer allegations of misconduct.

The source added that the chairman of state-owned oil and gas giant Sinopec, Fu Chengyu, and the company’s general manager, Wang Tianpu, are also being targeted by authorities for corruption. Read more of this post

“Poison rice incidents” have led to surge in closures of 70% of rice mills in China’s Hunan province; “毒大米”事件引发湖南米厂停工潮

“毒大米”事件引发湖南米厂停工潮

担忧后期卖粮难，部分农民考虑弃种

2013-03-25 　　作者：记者 周勉 白田田/长沙 北京报道　　来源：经济参考报

全国最大的水稻主产区湖南省正遭受“毒大米”事件影响。《经济参考报》记者近日调查了解到，受不久前关于湖南上万吨大米重金属镉含量超标的事件影响，湖南省米厂出现“停工潮”，在湖南最大的米市“兰溪米市”，当地企业反映已有70%的米厂停工。 Read more of this post

While many business people see the economy as badly performing and badly managed, our econocrats see it as having performed quite well and better than could have been expected. Why such radically different perspectives on the same economy?

State of economy all comes down to perspective, really

March 23, 2013

Ross Gittins

While many business people see the economy as badly performing and badly managed, our econocrats see it as having performed quite well and better than could have been expected. Why such radically different perspectives on the same economy?

Partly because business people – particularly those from small businesses – view the economy from their own circumstances out: If I’m doing it tough the economy must be stuffed. By contrast, macro economists are trained to ignore anecdotes and view the economy from a helicopter, so to speak, using economy-wide statistical indicators.

A bigger difference, however, is that business people are comparing what we’ve got with what we had, whereas the economic managers are comparing what we’ve got with what we might have got, which was a lot worse.

Business people know everything was going swimmingly in the years leading up to the global financial crisis of 2008-09, but in the years since many industries – manufacturing, tourism, overseas education, retailing, wholesaling – have been travelling through very rough waters.

The econocrats, however, have a quite different perspective: whereas the rest of us love a good boom, those responsible for managing the economy view them with trepidation. Why? Because they know they almost always end in tears and recriminations. Read more of this post

Malaysia’s Mahathir steps out of the shadows

Malaysia’s Mahathir steps out of the shadows
Posted: 24 March 2013 1109 hrs

KUALA LUMPUR: Four years after leading a charge to oust Malaysia’s previous prime minister, ex-leader Mahathir Mohamad is making his sizeable influence felt again as a close election looms.

Mahathir, who towered over Malaysia for 22 years with his grand development projects and hard-nosed politics, is 87 but has peeled back the years to step from the shadows and whip up support for the long-ruling regime he moulded.

Through his blog and visits to key constituencies, Mahathir has sounded off in typically blunt style, warning that a loss by the 56-year-old government would bring chaos.

In shades of four years ago, he told AFP that Prime Minister Najib Razak could face a ruling-party leadership putsch like his predecessor if he does not improve on a 2008 polls setback that shocked the Barisan Nasional ruling coalition. Read more of this post